Correlation Between Designer Brands and Birkenstock Holding

Can any of the company-specific risk be diversified away by investing in both Designer Brands and Birkenstock Holding at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Designer Brands and Birkenstock Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Designer Brands and Birkenstock Holding plc, you can compare the effects of market volatilities on Designer Brands and Birkenstock Holding and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Designer Brands with a short position of Birkenstock Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Designer Brands and Birkenstock Holding.

Diversification Opportunities for Designer Brands and Birkenstock Holding

0.93

Correlation Coefficient

Designer Brands  Birkenstock Holding

Almost no diversification

The 3 months correlation between Designer and Birkenstock is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Birkenstock Holding plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birkenstock Holding plc and Designer Brands is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Designer Brands are associated (or correlated) with Birkenstock Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birkenstock Holding plc has no effect on the direction of Designer Brands i.e., Designer Brands and Birkenstock Holding go up and down completely randomly.

Pair Corralation between Designer Brands and Birkenstock Holding

Considering the 90-day investment horizon Designer Brands is expected to under-perform the Birkenstock Holding. In addition to that, Designer Brands is 1.85 times more volatile than Birkenstock Holding plc. It trades about -0.11 of its total potential returns per unit of risk. Birkenstock Holding plc is currently generating about -0.14 per unit of volatility. If you would invest  5,769  in Birkenstock Holding plc on December 30, 2024 and sell it today you would lose (1,195) from holding Birkenstock Holding plc or give up 20.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Designer Brands  vs.  Birkenstock Holding plc

Designer Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Birkenstock Holding plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Birkenstock Holding plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Designer Brands and Birkenstock Holding

The main advantage of trading using opposite Designer Brands and Birkenstock Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Designer Brands position performs unexpectedly, Birkenstock Holding can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Birkenstock Holding will offset losses from the drop in Birkenstock Holding's long position.

The idea behind Designer Brands and Birkenstock Holding plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.